ProfessorBainbridge.com

Yours truly interviewed re Nelson Peltz's run at Disney

From Yahoo news:

Trian, which Peltz cofounded in 2005, oversees about $8 billion in assets under management. “That has enabled them to take on some big game,” said Stephen Bainbridge, a professor at the UCLA School of Law who has extensively researched corporate governance.

“I would say that on the spectrum of hedge fund activists, that Peltz is definitely at the aggressive end,” Bainbridge continued, though he noted that in many cases, Trian has made “changes that were regarded as helpful.”

The trouble is getting executives to listen without a protracted battle, he said, since CEOs are known for “big egos” and “nobody wants what they would regard as a sort of professional rabble-rouser coming in and telling them to change their plans.”

...

To his critics, Peltz’s tactics prioritize short-term returns over long-term financial health. “They’re in it and then out of it,” Bainbridge said, summarizing the argument against many hedge fund investors. (Trian has said the firm invests in companies for an average length of six years when it receives a board seat, longer than some competitors.)

...

Despite his triumphs, in recent years Peltz’s name has more often been associated with his daughter, Nicola, who last spring married the son of soccer legend David Beckham and fashion designer Victoria Beckham. The event took place at Peltz’s Palm Beach estate.

“There’s a certain amount of irony here that a guy who’s a multi-billionaire, and in the corporate world is known and feared… is sort of in the back of a picture with a bunch of Beckhams in it,” said Bainbridge. “It’s kind of funny that way.”

Why We Should Keep Teaching Dodge v. Ford Motor Co.

An updated version of my article Why We Should Keep Teaching Dodge v. Ford Motor Co. is now up on SSRN.

What is the purpose of the public business corporation? Is it to maximize shareholder value? Or is it to simultaneously enhance the welfare of shareholders, stakeholders, and the larger society? These are perennial questions, of course, but they also have been much in the news in recent years. Whether tagged as stakeholder capitalism, stakeholder theory, corporate social responsibility, or ESG (i.e., environmental, social, and governance), much attention is being paid.

The time has thus seemed propitious to many legal scholars to revisit the law of corporate purpose. Many of these scholars have been influenced by the late Lynn Stout’s work on the topic. Ten years ago, Stout published her book, The Shareholder Value Myth, which built on her earlier article, Why We Should Stop Teaching Dodge v. Ford. As the latter title suggests, Stout’s principal foil was the Dodge case.

Stout’s focus on Dodge was well chosen, as the case is included in almost all law school corporation law and business association casebooks and has been widely discussed in the academic literature. The influence of Stout’s critique of Dodge work was confirmed by a March 31, 2022, search of the Westlaw Law Reviews and Journals database, which identified 98 articles published in the last three years that cited her book and 43 during the same period that cited her article.

Given the renewed attention to the corporate purpose question and the continuing influence of Stout’s work on that debate, it seems appropriate to revisit her arguments to determine whether she was correct that law professors should stop teaching Dodge. I conclude that law professors ought to keep teaching Dodge. It was good law when handed down in 1919 and remains good law today.

Bainbridge, Stephen Mark, Why We Should Keep Teaching Dodge v. Ford Motor Co. (April 19, 2022). 48 Journal of Corporation Law 77 (2022), UCLA School of Law, Public Law Research Paper No. 22-05, Available at SSRN: https://ssrn.com/abstract=4076182

The Artwork for "The Profit Motive" Arrived Today

The artwork for my forthcoming book "The Profit Motive: Defending Shareholder Value Maximization" arrived today. I'm particularly proud of the generous blurbs from such prominent folks:

You can now pre-order "The Profit Motive: Defending Shareholder Value Maximization"

"The Profit Motive" is now in Page Proofs!

Page proofs! And, if I do say so myself who shouldn't, the best opening paragraphs I've ever written. pic.twitter.com/wfQvooR3RB

— Steve Bainbridge (@PrawfBainbridge) November 18, 2022

SOX Section 404 at Twenty

Mildly revised version of my article "Sarbaes-Oxley Section 404 at Twenty" has been posted: https://t.co/u1Ni6DtRgd pic.twitter.com/InuwllSmYj

— Steve Bainbridge (@PrawfBainbridge) October 18, 2022

Yours truly cited by SEC Commissioner Hester Peirce

The paper Commissioner @HesterPeirce cited was Sarbanes-Oxley § 404 at Twenty (August 26, 2022). UCLA School of Law, Law-Econ Research Paper No. 08, 2022, Available at SSRN: https://t.co/042KbCQSbF

— Steve Bainbridge (@PrawfBainbridge) October 14, 2022

From the Department of Self-Promotion

As Bertie Wooster said, “while one lives for one’s Art, so to speak, and cares little for the public’s praise or blame and all that sort of thing, one can always do with something to paste into one’s scrapbook, can one not?”https://t.co/ZhCYorQOvI

— Steve Bainbridge (@PrawfBainbridge) September 9, 2022

According to @BrianLeiter I’m the #40 law professor as ranked by H-index. https://t.co/WCBFi2mExa

— Steve Bainbridge (@PrawfBainbridge) September 9, 2022

My upcoming course "The Law of Elon Musk" featured in New York Magazine's Intelligencer Column

Here.

 

My new paper: Sarbanes-Oxley § 404 at Twenty

Bainbridge, Stephen Mark, Sarbanes-Oxley § 404 at Twenty (August 26, 2022). UCLA School of Law, Law-Econ Research Paper No. 08, 2022, Available at SSRN: https://ssrn.com/abstract=4201778

Section 404 of the Sarbanes-Oxley Act of 2002 (SOX) was intended to improve public company internal controls over financial reporting (ICFR). Faulty internal controls were believed to have contributed to many corporate scandals during the dot-com era. Empirical research of the pre-SOX era suggested that reporting companies with poor internal controls tended to have more frequent earnings restatements, more SEC enforcement proceedings, and poorer performance than comparable firms with strong internal controls. When SOX was adopted § 404 was not among the most controversial provisions. Instead, it was the attorney conduct rules, CEO and CFO certification requirements, and the ban on loans to officers and directors—plus the larger question of federalizing corporate governance—that generated most of the early criticism aimed at the statute. Once companies began implementing § 404’s mandate for assessments of their internal controls over financial reporting, however, it became apparent that compliance costs were considerably greater than anticipated. In short order, § 404 became—and remains—SOX’s most controversial provision. SOX’s twentieth anniversary seems an opportune time to reassess the controversy over § 404. There is a considerable body of empirical evidence on the costs and benefits of § 404, which this article reviews. As it turns out, however, there are so many potential confounding factors that all of the evidence must be viewed with a degree of skepticism. Nonetheless, a few conclusions can be drawn. With the benefit of hindsight, it seems clear that Congress in 2002 had no idea what it would cost companies to comply § 404. The SEC had an estimate of what § 404(a) compliance would cost but had no idea what § 404(b) compliance would cost. Sticker shock seems the right description of the reaction once those costs became clear. Section 404 compliance costs were substantial from the outset. Those costs were disproportionately borne by smaller firms from the outset. Section 404 compliance costs remain high and show no signs of dropping over time. It remains the case that those costs are disproportionately borne by smaller firms. As far as achieving its main goal of reducing material weaknesses in ICFR, § 404 cannot be deemed a success. Both adverse managerial reports and auditor attestations actually rose prior to 2014 and have dropped only slightly in the subsequent period. Problems with firms failing to remediate persistent material weaknesses remain a source of concern.

We are 40th

@BrianLeiter ranks law professors by H-scores. I'm in 40th place. My @UCLA_Law colleagues Eugene Volokh (48) and @rickhasen (63) are also on the list. As are corporate law giants Lucian Bebchuk (6), Jon Macey (13), and Bernie Black (14) https://t.co/mWee3X2721

— Steve Bainbridge (@PrawfBainbridge) August 11, 2022

The Business Lawyer's Symposium "The ESG Movement: Law, Economics and Values,” includes my paper "Don’t Compound the Caremark Mistake by Extending It to ESG Oversight"

Symposium behind a paywall.

My article behind a paywall.

My blushes

Prominent Delaware corporate lawyer Francis Pileggi calls yours truly "Delaware’s favorite corporate law scholar, the prolific and widely-quoted Professor Stephen Bainbridge...."

Yours truly quoted in Christian Science Monitor re Woke Capitalism

Simon Montlake @sjmontlake, ‘Woke capitalism’ on the rise – and running into resistance:

“We’re starting to see a reaction,” says Stephen Bainbridge, a law professor at University of California, Los Angeles who studies corporate governance. “Companies are having to decide whether they’re going to take sides or to market to everybody.”  ...

That views of big business have also soured on the right, for different reasons, should concern company boardrooms, says Professor Bainbridge. 

“There’s a resurgence of right-wing populism that has very little in common with left-wing populism other than a deep distrust of big business. That’s the political dynamic of the moment. For the first time in a long time, you have strong populist wings in both parties that are skeptical of big business,” he says.

See generally Stephen M. Bainbridge, Corporate Purpose in a Populist Era, 98 Neb. L. Rev. 543 (2019)
Available at: https://digitalcommons.unl.edu/nlr/vol98/iss3/2

We are cited

At bottom, materiality is a fact question, which the Sixth Circuit has cautioned “typically should not be decided” at the motion to dismiss stage. Id. (quoting Stephen M. Bainbridge & G. Mitu Gulati, How Do Judges Maximize? (The Same Way Everybody Else Does—Boundedly): Rules of Thumb in Securities Fraud Opinions, 51 Emory L.J. 83, 115 (2002)).

Zaller v. Fred's, Inc., 219CV02415SHLATC, 2021 WL 7541401, at *7 (W.D. Tenn. Mar. 31, 2021)